Hyundai and Kia to Recall 1.5 Million Vehicles in the U.S. and South Korea
Hyundai Motor and Kia Motors said on Friday they plan to recall nearly 1.5 million vehicles in the United States and South Korea due to engine issues, the latest blow for two firms already struggling in key markets.
The recall, which could cost the two firms hundreds of millions of dollar each, revives quality concerns at a time when Hyundai (HYMTF) and Kia (KIMTF) face a sharp drop in China sales and sluggish demand in the United States and South Korea.
The two automakers have submitted a plan to recall 1.3 million vehicles due to an engine defect that could cause them to stall, the companies said in a statement. The plan, which must be approved by U.S. authorities, involves Hyundai‘s Sonata and Santa Fe and Kia’s Optima, Sorento and Sportage.
The duo said they were also recalling 171,348 vehicles in South Korea due to a similar manufacturing problem, which leads to possible stalling of its Theta 2 engine.
The recall could hit earnings with the recall costing each company as much as 250 billion won ($220.19 million), said Koh Tae-bong, an analyst at Hi Investment & Securities.
The companies declined to comment on the cost of the recall.
Hyundai Motor shares closed down 2.4%, compared to a flat broader market. Kia Motors were down 0.9%.
This is not the first time Hyundai and Kia have been forced to recall vehicles due to defects in their Theta engines, which they manufacture themselves.
In 2015, Hyundai Motor recalled 470,000 Sonata sedans in the United States to replace faulty engine parts.
A Hyundai spokeswoman said the latest recall involves a different engine problem. But a South Korean ministry official said they were similar.
The ministry said metal debris in crankshafts could cause engine damage, leading to possible engine stalling.
“The recall is related to a manufacturing process problem, not the structural problem of Theta 2GDi engines and we have completed improvements through appropriate measures,” the companies said in a statement.
The recall in South Korea covers Hyundai‘s Sonata, Grandeur sedans and Kia’s K5, K7 and Sportage models equipped with a 2-liter or 2.4-liter Theta 2 gasoline engine produced before August 2013, the South Korean transport ministry said.
Hyundai will replace a defective engine with a new one after inspection. The recall in South Korea will start on May 22.